By TOM WRIGHT and BRADLEY HOPE
Wall Street Journal
April 11, 2016

An Abu Dhabi state fund said publicly for the first time on Monday that it hadn’t received billions of dollars in payments that a controversial Malaysian fund set up by Prime Minister Najib Razak claims it sent.

The International Petroleum Investment Co., or IPIC, an Abu Dhabi government fund, said in a statement to the London Stock Exchange that it was aware of media reports that 1Malaysia Development Bhd., or 1MDB, had sent money to a company called “Aabar Investments PJS Ltd.”

IPIC said in the statement that it has a subsidiary called Aabar Investments PJS, but that the similarly named company “was not an entity within either corporate group.”

The Wall Street Journal, citing people familiar with the matter and bank-transfer documents, earlier reported how the 1MDB fund sent $2.4 billion to the imitation Aabar, which was set up in the British Virgin Islands and later closed.

A report released last week by a Malaysian parliamentary committee inquiry into 1MDB, which is the subject of corruption probes in at least seven countries, put the amount transferred to the imitation Aabar at $3.5 billion.

About $681 million of this money later flowed via a circuitous route into the private account of Mr. Najib, the Malaysian prime minister, the Journal has also reported, citing people familiar with the investigations.

Mr. Najib has denied wrongdoing or taking money for personal gain.

Malaysia’s attorney general said the money that entered his account was a legal donation from Saudi Arabia’s royal family and that most of it was returned, and he cleared Mr. Najib of wrongdoing.

The 1MDB fund denies wrongdoing and says it never sent money to Mr. Najib’s accounts.

The Journal further reported how the imitation Aabar was set up by two executives of the genuine Aabar, Khadem Al Qubaisi, the fund’s former chairman, and Mohamed Badawy Al Husseiny, its former chief executive.

Both men were removed from their positions last year. Authorities in the United Arab Emirates, of which Abu Dhabi is the capital, have frozen the assets of the men and banned them from leaving the country. Attempts to reach both men were unsuccessful and they haven’t commented previously.

The 1MDB fund initially rejected the Journal’s reporting on the imitation Aabar as a “campaign to malign 1MDB” and a sign the newspaper was “working hand in glove with certain political interests in Malaysia.”

But on Monday, it responded to IPIC’s statement by acknowledging that it sent “substantial sums” to the imitation Aabar in the British Virgin Islands. The fund said it made the payments “pursuant to various legal agreements” with Messrs. Al Qubaisi and Al Husseiny.

“It is, therefore, a surprising claim that neither IPIC nor Aabar have knowledge of, nor have benefited from, payments made by 1MDB to Aabar (British Virgin Islands),” the statement said.

The dispute between 1MDB and IPIC over the payments appears to complicate a debt-restructuring deal between the two parties that was supposed to be concluded this summer.

1MDB didn’t respond to a request for comment.

Under the terms of the deal, IPIC has taken over interest and principal payments on the $3.5 billion in 1MDB bonds that it guaranteed. IPIC also made a $1 billion payment to 1MDB last year to help the Malaysian fund meet a looming debt payment. In return, 1MDB has to transfer assets of the same value to IPIC by June.